- The USD/CAD depreciates as the Canadian dollar gains ground amid the strengthening of oil prices.
- The Canada Ministry of Finance announced the withdrawal of the proposed tax on digital services to advance broader commercial negotiations with the USA.
- Operators expect US labor market data to obtain greater impulse on the Fed policy position.
The USD/CAD loses ground, quoting around 1,3670 during the Asian hours of Monday. The Canadian dollar (CAD) gains ground after the declaration of the Canada Ministry of Finance on Sunday, which announced that it will rescue the digital services tax to advance in broader commercial negotiations with the United States (USA). Canada’s Prime Minister Mark Carney, and President Donald Trump agreed that the parties will resume negotiations to reach an agreement before July 21.
The USD/CAD torque is depreciated as the Canadian dollar (CAD), linked to raw materials, receives support from the improvement in oil prices. It is important to note that Canada is the largest oil exporter to USA (USA.).
The price of oil West Texas Intermediate (WTI) is quoted around $ 64,70 per barrel at the time of writing this article. However, the potential for increasing crude oil prices could be limited amid the decrease in fears on supply interruptions, driven by the high fire in the Middle East. Meanwhile, President Donald Trump said he could support the relief of sanctions to Iran if there can be peace. In addition, reports indicated that OPEC+, the organization of oil export countries and its allies, was prepared to increase production by 411,000 barrels per day in August, after a similar increase already planned for July.
The USD/CAD pair potential could be restricted as the US dollar (USD) fights, since operators expect the Federal Reserve (Fed) Cut rates at the September meeting. The data showed on Friday that personal spending in the US fell unexpectedly in May, the second decrease of this year. Meanwhile, personal income in the US fell 0.4% in May, the highest decrease since September 2021.
A series of key employment figures in the US is scheduled to be published later in the week, which could offer a new impulse to the policy perspectives of the US Federal Reserve (Fed). The June US payroll report is expected to show that the economy added 110,000 new jobs, below May 135,000; The estimates rank is currently between a maximum of 140,000 and a minimum of 75,000. In addition, it is anticipated that unemployment increases slightly 4.3% from 4.2%.
Canadian dollar faqs
The key factors that determine the contribution of the Canadian dollar (CAD) are the level of interest rates set by the Bank of Canada (BOC), the price of oil, the main export product of Canada, the health of its economy, inflation and commercial balance, which is the difference between the value of Canadian exports and that of its imports. Other factors are market confidence, that is, if investors bet on riskier assets (Risk-on) or seek safe assets (Risk-Off), being the positive risk-on CAD. As its largest commercial partner, the health of the US economy is also a key factor that influences the Canadian dollar.
The Canada Bank (BOC) exerts a significant influence on the Canadian dollar by setting the level of interest rates that banks can provide with each other. This influences the level of interest rates for everyone. The main objective of the BOC is to maintain inflation between 1% and 3% by adjusting interest rates to the loss. Relatively high interest rates are usually positive for CAD. The Bank of Canada can also use quantitative relaxation and hardening to influence credit conditions, being the first refusal for CAD and the second positive for CAD.
The price of oil is a key factor that influences the value of the Canadian dollar. Oil is the largest export in Canada, so the price of oil tends to have an immediate impact on the value of the CAD. Generally, if the price of oil rises, the CAD also rises, since the aggregate demand of the currency increases. The opposite occurs if the price of oil drops. The highest prices of oil also tend to give rise to a greater probability of a positive commercial balance, which also supports the CAD.
Although traditionally it has always been considered that inflation is a negative factor for a currency, since it reduces the value of money, the opposite has actually happened in modern times, with the relaxation of cross -border capital controls. Higher inflation usually leads to central banks to raise interest rates, which attracts more capital of world investors who are looking for a lucrative place to save their money. This increases the demand for the local currency, which in the case of Canada is the Canadian dollar.
The published macroeconomic data measure the health of the economy and can have an impact on the Canadian dollar. Indicators such as GDP, manufacturing and services PMIs, employment and consumer confidence surveys can influence the CAD direction. A strong economy is good for the Canadian dollar. Not only attracts more foreign investment, but it can encourage the Bank of Canada to raise interest rates, which translates into a stronger currency. However, if the economic data is weak, the CAD is likely to fall.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
